Revenue in the first half of fiscal year 2021 is in line with our expectations.
We hope that Education will announce its results for the first half of fiscal year 2021: revenue is 1.18 billion yuan, an increase of 35.9% over the same period last year, which is basically in line with our expectations; gross profit is 640 million yuan, corresponding to a gross profit margin of 54.2%, an increase of 1.7% over the same period last year; adjusted net profit is 550 million yuan, corresponding to an adjusted net profit rate of 46.2%, an increase of 2.2% over the same period last year. The management said that the adjusted homing net profit for the whole fiscal year 2021 maintained a guideline of 80-850 million yuan.
Development trend
The target of acquisition led to the growth of income, and the number of enrollment increased strongly. The company's revenue in the first half of fiscal year 2021 was 1.18 billion yuan, an increase of 35.9% over the same period last year, mainly due to the thickening income brought about by the acquisition and consolidation of colleges and universities and the endogenous growth of existing colleges and universities. In terms of endogenous growth:
Excluding the impact of consolidation, the number of students in existing colleges and universities has increased by about 28% compared with the same period last year, and the internal income has increased by about 18% compared with the same period last year. The strong growth in the number of students is mainly due to the efficiency of the company's enrollment channels and the incentive role of the enrollment team. The impact of the consolidated income of the acquisition target is about 151 million yuan: 1) on September 29, 2020, the company acquired a 100% stake in Yingdi International University, and the international education income brought about by the consolidated statement during the performance period was about 150 million yuan. The number of students in the performance period increased by 15000; 2) on October 21, 2020, the company acquired Nanchang Film and Television Communication Vocational College, and the number of students increased by 2000 during the performance period. We expect the company's revenue in fiscal year 2021 to reach 2.26 billion yuan, an increase of 43.9% over the same period last year. Taking into account that the company has acquired agreements with three other schools as of the date of the results announcement, namely, Nanchang University Gongqing College, Jinken Vocational and Technical College and Shinawatra University of Thailand, if we assume that the Gongqing College and Jinken Vocational and Technical College of Nanchang University in China merged smoothly in fiscal year 2022, we expect revenue growth to increase to 24% year-on-year (the original forecast is 12%), and the target price will correspond to 12 times the adjusted EV/EBITDA for fiscal year 2022.
Excluding the impact of non-operating items, the company expects full-year profit to meet the guidelines. The company's gross profit in the first half of fiscal year 2021 is 640 million yuan, corresponding to a gross profit margin of 54.2% (+ 1.7ppt); the adjusted net profit is 550 million yuan, and the adjusted net profit rate is 46.2% (+ 2.2ppt).
Among them, due to Yinchuan Energy Institute's return to impairment loss of 180 million yuan, and due to the expansion of enrollment channels, nearly 160 million yuan of additional cost of sales expenses were included, excluding the impact of the above non-operating items, the company's adjusted net profit increased by about 40% compared with the same period last year. Management said that excluding the impact of non-recurrent items, FY2021's adjusted homing net profit guidance remained at 80-850 million yuan. We believe that as the company gradually integrates and optimizes the newly acquired Yindi International University, the company's gross profit margin and profit margin will continue to improve, and the adjusted net profit for fiscal year 2021 is expected to be 830 million yuan, an increase of 45% over the same period last year.
Profit forecast and valuation
We basically keep our revenue and adjusted net profit forecasts unchanged for fiscal 2021. Due to the strong growth in enrollment, we raised our revenue forecast for fiscal 2022 by 2.7 per cent and adjusted net profit by 5.4 per cent, taking into account the company's integration optimization of newly merged schools. Maintain an outperform industry rating and a target price of HK $3.60 (corresponding to 18 times the adjusted EV/EBITDA for fiscal year 2021), and the current share price corresponds to 14 times the adjusted EV/EBITDA, for fiscal year 2021, which has 32.4% upside over the current share price.
Risk
Risks related to mergers and acquisitions; weak growth in enrollment and tuition fees.